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Federal Reserve, amidst hopefulness, damns economy with faint praise
Washington Wire Global Report
Aug. 14, 2009

What started as a supposed announcement by the Federal Reserve that the economic recession was over has turned out to be little more than shifts in the financial market and hopefulness that "policy actions" will produce future benefits, coupled with observations of reduced business investment, job loss, and tight credit.

The Federal Reserve announced in an Aug. 12, 2009, news release that information received since a June meeting "suggests economic activity is leveling out." Given that the United States has been in a recession, this observation implied that the recession might be reaching its trough and therefore will get now worse.

However, the Federal Reserve essentially limited its optimism to what it considered improved conditions in financial markets in just the preceding few weeks. While positing that "household spending ... continued to show signs of stabilizing" the caveats on household spending seemed more extensive than that notion of stabilizing -- "constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit."

For their part, "businesses are still cutting back on fixed investment and staffing." While the Federal Reserve praised business for aligning inventory with sales, those sales apparently are down.

The bottom line? "... economic activity is likely to remain weak for a time ..."

Click here to read the Federal Reserve Board of Governors news release.

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